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Sri Lanka Treasuries yields slip

Aug 25, 2010 (LBO) - Sri Lanka's Treasuries yield slipped between 10 to 19 percent on Wednesday, auction results released by the government's debt office showed, following a 50 basis point rate cut on August 25.

The 3-month yield fell 12 basis points to 7.28 percent, the 6-month yield fell 19 basis points to 3.1 billion rupees and the 12-month yield fell 10 basis points to 8.08 percent.

The debt office, which is a unit of the Central Bank said 10.28 billion rupees was raised by selling bill to real buyers though only 10.

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0 billion rupees in bills matured.
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The debt office frequently prints money along the yield curve in de facto 'quantity easing' exercises to keep rates down which critics have said have contributed to needless inflation in the past, requiring higher than necessary inflation and interests rates in the long term.

Sri Lanka keeps a tight peg with the US dollar with current policy rates of 9.0 percent, which is several hundred basis points higher than is actually needed to maintain the peg and keep inflation to near to the anchor US dollar rates if ad hoc bill purchases can be avoided. But the rupee sometimes comes under pressure amid excessive bill purchases by the central bank.

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